Lara

INTRODUCTION

This appeal arises from an application by State Farm General Insurance Company (SFG) to increase its homeowners’ insurance rates, under the prior approval system implemented by Proposition 103 (Ins. Code,

§ 1861.01 et seq.)1 Nonprofit Consumer Watchdog (CW) intervened in the proceeding, and challenged SFG’s proposed rates. Section 1861.05, subdivision (a) (§ 1861.05(a)), requires the Insurance Commissioner to “consider whether the rate mathematically reflects the insurance company’s investment income.” The Commissioner relied on regulation section 2644.20, addressing projected yield, to use the combined annual statement of SFG’s parent company, State Farm Mutual Automobile Insurance Company (State Farm Mutual) and its property-casualty affiliates. The Commissioner ordered SFG to decrease its rate retroactively and issue refunds (Rate Order).

Further statutory references are to the Insurance Code unless noted. Regulation references are to the Proposition 103 regulations (Cal. Code Regs., tit. 10, § 2641.1 et seq.), unless noted.

2 SFG filed a petition for writ of mandate. The superior court determined section 1861.05(a) requires the rate to mathematically…